Westminster International University in Tashkent Certificate of Foundation Studies Business and its Environment

2010 - 2011

To be completed by the student Student’s ID number | 00001693 | Module name | Business and its Environment | Module code | BUZF320 | Tutor | | Individual assignment | | Group assignment | | Submission deadline | 23.12.2010 | I certify that all material in this coursework which is not my own work has been acknowledged and I am fully aware of the consequences of plagiarism. Signed | For Academic Registrar use only |

Company Profile

It is incontestable that demand for high-technology increased sharply in last two decades. As the proof of this fact I intend to provide brief information about Panasonic Corporation which is specialized to produce different type of electronics.

Product.

In XXI century electronics has assumed a dominating role in every field, therefore Panasonic Corporation provides 3 categories of products such as consumer, business and professional, also industrial solution products. Consumer goods include electronics such as mobile phone, home communication, home appliances and batteries. Business and professional products contain office communication, notebook PC, professional AV etc. And the last category, industrial solution goods involve electromechanicals and power suppliers.

Location.

The head office of the Panasonic Company is located in commercial and economic center of Japan, Osaka. The city is considered as capital of Osaka Prefecture in Kansai region. The GDP of Osaka including Kobe city is $341 billion, becoming a match of world’s top cities such as Paris and London.

Company size.

The company occupies 15,788 65 square meters with two buildings including the main building and its annex. As regards the number of employees, it contains approximately 384,586 people and the amount of consolidated Companies is 680. (As of March 31.2010).

Company History.

Nowadays’ giant electronics company Panasonic was founded by Konosuke Matsushita in 1918 which initially produced a duplex lamp socket. Two years later a household business transformed to a small enterprise having first office and factory in Osaka. Between 1923 and 1927 the company developed and marketed bullet-shaped and square bicycle lamps, also electrothermal products such as super iron and radio. In July 1933 there were constructed a new head office and factory in Kadoma, where it started to produce first electric motor. In the fifth decade of XX century Panasonic proposed to Philips to cooperate and to become one of the world’s giant electronic manufacturers. As a result of the deal by the end of the year there was established “Matsushita Electronics Corporation”. In those years one of the priorities of the company was producing 17-inch monochrome televisions. In 1956 it began to market home appliances such as washing machine, refrigerator, TV, vacuum cleaner etc. The 1950s ended by opening several new factors and setting up Matsushita Electric Corporation of America (MECA) in New York. In 1977 the company started to develop VHS-standard VCR and marketed it worldwide. Moreover, there was established joint venture company with Beijing in 1985 which manufactured picture tubes for color TV and later added major sized screens.
In the last decades of XX century the Panasonic Corporation is involved to produce notebook PCs, cellular phone, DVD player, Plasma and Digital TVs.

Market share. As the Panasonic Company products’ range is very wide it is suitably to provide information about the market share of most profitable and popular type of electronics, namely telephone.
It can be seen from the graph that home communication device produced by the company was in a dominating position with taking 21% of world market share in 2009.Whereas its competitors’ shares were less than half.

The graph illustrates information about market share of telephone produced by Panasonic Company between 2008 and 2009.

Economic Environment.

It is incontestable that high revenue of company is dependent on economic condition which has a high impact in business performance. Macroeconomic factors such as economic growth, income level of population, interest rate, inflation, exchange rate are measurements of company’s success. Therefore, it is necessary to analyze how the mentioned factors can effect on product demands of the Panasonic Company.

GDP-real growth rate.
As the world is in recession period Japan’s GDP-real growth rate decreased by -5.2% in 2009 and this had a negative impact on the Panasonic Corporation’s revenue. Furthermore, the low percentage of growth caused the decline of the quantity of domestic products which led to reduction of the net sale of the company by 4%.
Income level of population.
There is no doubt that high consumer income guarantees higher profit of company. Particularly, the average household income in Japan is about $60,600 which decreased by 3.3% in 2009 becoming the strongest decline in last two decades. Consequently, the mentioned factor served to impair the condition of fiscal 2009.
Inflation rate.
It is the best period for company when inflation rate is in the middle stage since the rapid inflation causes the increase the cost of products which leads to decline output demand. Moreover, diminution in the average price level of goods, namely deflation can be reason of the recession. According to CIA-The World Factbook Japan’s inflation rate decreased to -1.4% in 2009 which is considered as deflation taking the fourth place in a comparison to the other world’s countries.
Interest Rate.
Interest rate is one of the macroeconomic factors which influence strongly on company’s economic condition. Fortunately, the Japan’s interest expenditure was 0.3% in 2009.The mentioned percentage allowed to the company to end the fiscal year with high profit. However, other macroeconomic factors prevented to have high revenue.
Exchange Rate.
As stated by Saxo Bank Datacenter during the last month of 2010 there was depreciation of the Japan’s Yen exchange rate towards USA dollars. The company had a big opportunity to expand its business in foreign market by reducing the product price. Undoubtedly, it leads to increase the demand for the company products in overseas countries. Hence, when the company imported the foreign supplies it faced the disadvantages of depreciation. Perhaps, it was one of the factors which influenced on having low income in fiscal 2010 of the Panasonic Company.

Fiscal Policy.
In 2009 Japan faced a government budget deficit is equal to 7.4% of the GDP. In order to fulfill the budget Government provided three-stage fiscal policy such as “Immediate Economic Stimulus”, “ Medium-term Fiscal Reconstruction” and “Medium and Long-term Economic growth through Reform“. The decision stated by Government affects on company performance. The high tax rate is reduction of after-tax earnings directly.

Industry environment.

Industry characteristics are measurement of company’s value which defines the company position in the world market by its market share, competitive advantage, competitors. The Company distributes its outputs to 680 Consolidated Companies situated in North and South America, Europe, Asia and others. According to fiscal 2010 statistics, sales in domestic market were equal to 3,994 billion yen, decreased by 2% from the last fiscal year. Likewise, in overseas countries such as North and South America the sales amounted to 3.424 billion yen, declined to 7% comparing to fiscal 2009. In Europe, the market sale decreased sharply by 20% which is equal to 771 billion yen. Conversely, in Asia the sale climbed to 1% to 1,735 billion yen. Overall, comparing to previous fiscal year Japan experienced lower percentage of total market sale in fiscal 2010 which is equal to 7,417 billion yen.
Having fair competitors is one of the successes of the company in world market as the fair and square competition is the cause of market growth. The direct and substitute opponents of the Panasonic Company consist of Samsung, LG, TCL electronics and Sony.
The chart below illustrates information about market share of LCD TVs in 2010.

As it can be seen from the chart that Samsung is in a dominating place pointing to 17,2%. Likewise, LG TVs’ share is equal to 14,8% while Panasonic is taking the third place in market share of LCD TVs. TCL electronics Company have 6,6% of market share whereas Sony’s percentage contains only 1/3 of Samsungs’. Less than half part of world TV market share belongs to other companies under different brand names.
Competitive advantage. In order to achieve higher percentage of market share of company should find the ways to create a competitive advantage by following next characteristic such as low-cost production, better quality and product differentiation. One of the Panasonic company’s competitive advantage is providing the outputs in lower price comparing to its rivals. According to annual report of fiscal 2010 the company provided Full HD Flat-panel TVs in a lower cost. With respect to main competitors of the company Samsung, it is considered that company is dominating place for not only its good quality and respective cost, but also for manufacturing design.

Political and legal environment.

The role of political and legal environment is very important in business decisions and the company performance. Particularly, government passes the regulations to guarantee employees’ safety and health in work, their rights and minimum wage and company should follow the laws stated by government, toward its consumers, competitors and employees. According to Civil Code of Japan full-time working hours is 8 hours per day which equals to 40 hours per month. Furthermore, employees who work six hours a day should have a break about 45 minute while it rises to one hour where working hour is about eight hours. Employers must guarantee one holy day during the five or six working days. In the case of exceeding institutive working hours employees should provide an increased salary according to exceeding working hours. As regards to health and safety of employees, the government provides regular health check-up once in a year. Especially, employees who are involved in X-ray related jobs have a two time health check-up in a year. Japanese Government also passed laws to control discrimination of religion and sexual harassment.
In respect to consumers right The Government of Japan set up laws such as Financial Products Sales Law of 2000 , Designated Products Transaction Law of 1976 which controls methods of sales to purchasers such as door-to-door sales, mail order sales and telephone sales and Product Liability Law of 1994. This law protects the accidents such as injury, fire, death which occurred due to defect of goods and also it serves to strengthen liability for compensation for products. In addition, there is a popular organization The National Consumer Affairs Center of Japan which defends consumer rights. This organization provides teaching seminars, sessions, trainings to enrich consumer knowledge in sphere of technology.
One of the priorities of the government is to control the fair and free business competition. It is regulated to prevent mergers and ban uncompetitive business atmosphere. If the range of monopolies expands there does not exist free competition which leads to block of Japan market growth. Thus the Government of Japan established Fair Trade Commission takes responsibility regulating Antimonopoly Law.
Many manufacturing companies are inclined to pollute the environment, thus the government passed law about protecting the environment such as Environment Basic Law of 1972, Law Promoting and Forming the Environmental Society directed to reach an effectual usage of resources. In addition there are environmental laws which regulate air pollution and water pollution included to Pollutant Release and Transfer Register Law. In order not to violate the stated rules company should work out programs that can reduce the environment pollution. Regarding to The Panasonic Company it set up “Eco-Idea” program as a defender of environment. Every year the representatives of the program work out new strategies In order to be number one Green Innovation Company in electronics industry.

Socio-cultural environment.

It is irrefutable that the rate of product demand can be affected by cultural attitudes in terms of religion, language, education, political and economic philosophy and social structure. Demand of products is not equal in the five Continents of the world as there are vary cultures and traditions of every nation.
Usually goods such as foods and clothes are very sensitive to cultural characteristics; however electronics also can be cause of breaking the cultural norms. For instance, in some Islamic countries it does not suit the religious standard to carry camera and to take photo or to have television and video/audio devices. Thus, the company should be wary in making business decision about exporting products.
There is no doubt that electronics of the latest innovation have a negative impact on human health which is called as social threats. For example, the latest model and big-sized televisions increase the threat on health of children which is absolutely inescapable. However the company can provide threat-reducing glasses for children in order to defend the radiation. Moreover, laptop PCs, mobile phones and microwave ovens are also very harmful for human health by emanating radiations in a short distance.

Ethical Environment.
Usually every businessman starts his commerce with a fixed business plan which provides information about expenses and salaries; however, there are other aspects of business such as social responsibility and ethics which play important role in future success of company. Each company should work out the “Code of Conduct” which does not allow violating its ethics and social responsibility.
In case of transgressing the business ethics the company investors, employees, managers can adversely be affected. For instance, one of the Panasonic Company’ managers decided to employee his relatives and friends when the labor force is not needed absolutely. As the Company provides a good salary for new employees its profit can be reduced sharply. In this case shareholders become as the adversely affected party which is a result of unethical decision.
Another example of unethical decision is exceeding the working hours by company managers. For example, The Panasonic Company manager exceeds the working hours from 8 to 12 hours which can threat the health of employees.
In order to reduce these kinds of unethical decisions the Panasonic Company provides “Code of Conduct” which ensures the social responsibility toward its stakeholders. It is one of the priorities of the company to provide a good condition to its employees. According to the “Code of Conduct” the company fulfill s labor and employment management such as prohibiting of child , discrimination, sexual harassment, forced labor and health and safety management, guarantee of right of collective bargaining. In order to ensure costumer rights the company provides training and seminars or distributes booklets which serve to enhance the costumer knowledge acquainting with the latest type of technology. Furthermore, it is guaranteed the safety of the products in term of design, manufacturing, marketing and development.

Technological environment.

The Worldwide Network and technology which is developing day by day has already captured every sphere with passing information in an extremely high speed. There is no doubt that success of world top companies lies on technology, named as powerful tool of XXI century.
Panasonic Corporation is in a range of such fortunate companies. As the proof of this success the role of the Worldwide Network should be maintained in a modern business. The first factor which has influenced tremendously on every industry is Electronic Commerce. The company provides e-shopping in the five continent of the world. There are many advantages of purchasing outputs. Costumers of the Panasonic Company have a good opportunity to choose the suitable product and to purchase it simply, spending several minutes at the computer by using the Internet. Furthermore, payment can be done via the Internet banking and purchaser can receive an ordered product within the several hours by virtue of the fast delivery techniques. Perhaps the company has higher profit by selling directly to costumers, respectively reducing the outlet rent price.
Secondly, the technology has made a huge impact on manufacturing of products in terms of design and quality. For instance, televisions which were made in by the Panasonic Company in 2005 differ strongly from TVs produced in 2010 with weak technology. As a result of an acute changes at the present the company provides LCD, LED LCD, Plasma TVs with 3D, Internet streaming services, LED backlight technology.

Having advantages of technology makes the businessmen face its disadvantages. One of the insoluble problems is unemployment. While technology is developing in an extremely high speed it is continuing to replace human labor with various types of machines and computers. For example, in 2005 there were 334,752 employees in the company; however the number decreased to 292,250 by 2009. Moreover, the high tempo of changes results in strong competitiveness in world market which leads to become the goods obsolescent after several days existence in a market. There is no exact solution for such kind of problems as there is no reduction for high-tech.
Moreover, it should be pointed out that The Panasonic Company provides e-Work@HomeSystem program to its employees which is a good opportunity to control the office condition and to communicate with office workers from long distance. According to the company statistics in fiscal 2010 over 5,500 employees used the system widely from home two or three times a week.

Reference.
1. http://panasonic.net/corporate/ http://panasonic.net/center/tokyo/floor/index.html http://www.city.osaka.jp/keikakuchousei/toukei/G000/Gyh19/Gb00/Gb00.html
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